Kroger

The year 2015 brought an end to one of the most enduring major retailers in the history of United States business. The Great Atlantic and Pacific Tea Company (universally abbreviated to A&P Tea Co) succumbed after a succession of bankruptcy proceedings played out in the early 2010s (bringing an end to 156 years of continuous retailing in the US).

A&P Tea endgame
The beginnings of A&P Tea’s decline in the retail world harks back as far as the 1950s – the source of the downward trend was its inability to maintain parity with competitors who were opening larger supermarkets that, driven by customer demand, were more modern[1]. Partial sell-offs followed in the seventies and eighties. Things didn’t really improve for the grocery ‘Goliath’ despite sporadic and ephemeral upsurges[2]. In 2010 the company filed for bankruptcy, but were only able to hold on till 2015 when A&P again filed for Chapter 11 bankruptcy, this time being permanently wound up.

A&P store, Westwood, NJ, 1959According to industry analysts A&P’s demise could be attributed to a misguide focus, and to the company’s failure “to evolve with the changing market”…A&P had a tendency to concentrate on “extracting dollars from its vendors instead of selling to its customers”. This exhibited a woeful neglect when it came to improving the customer experience (George Anderson, editor-in-chief of RetailWire)[3].

The company’s woes were exacerbated by a failure to modernise its look…it doggedly kept its grocery lines to the basics and was disinclined to adapt to changing tastes and interests of consumers with their growing preference for organic, healthy and gourmet foods. Meanwhile its competitors like Whole Foods, The Fresh Market and Kroger were stealing a march on the erstwhile market leader[4].

Humble leather goods origins
Atlantic and Pacific’s company history traces itself back to 1859, founded by George Gilman, as a sideline to his hide and leather importing business. Gilman’s diversification into mail-order tea was so successful that he dropped the leather and Gilman & Co by 1869 had become the Great Atlantic and Pacific Tea Co[5]. A&P Tea’s fortunes rose with the ascent of George Huntington Hartford who assumed control in 1878. George and his sons (affectionately known as “Mr George” and “Mr John”) oversaw the company’s inexorable growth and monopolistic practices[6].

A&P Tea at its zenith
At its peak in the 1930s (with the Hartford brothers still ensconced at the helm), A&P was by far the largest grocery chain in the US with 15,709 stores in 39 of the 48 states plus parts of Canada. The tea and coffee merchants had already diversified into bakeries and pastry and candy shops, and introduced innovations in food retailing such as pre-packaged meats and food-testing laboratories (pioneers of quality assurance)[7]. The Economy Store was another A&P concept: small stores located in secondary streets, away from the main street (comparison with King Kullen), inexpensive “no frills” lines; operated by only one or two staff members; low cost, high volume[8].

Slow to embrace the supermarket concept
The Hartfords were unimpressed by and reluctant to adopt the model of the supermarket, pioneered by King Kullen and others. Finally in 1936 A&P opened their first supermarket in Braddock, PA. Eventually the company’s supermarkets came to replace the increasing obsolete Economy Stores[9].

1928 A&P grocery adWhen it came to reading changing consumer preferences after WWII, A&P Tea, as was the case with F.W. Woolworth, was slow to move its stores from the urban centres to the suburbs, thus falling behind rivals like K-Mart, Safeway and Kroger in this respect. From the 1960s on A&P experimented with discount stores A-Mart (folded as its name was too like K-Mart!) and WEO (Warehouse Economy Outlet) with moderate results[9]…A&P sales continued to flatten out, it continue to jettison stores into the 21st century, with its market share haemorrhaging in the fierce onslaught of rising powerhouses such as Walmart[10].

PostScript: Legacy of the retailing ‘Goliath’
The heights to which Greater Atlantic and Pacific Tea Co rose in its heyday were of Everest proportions. Until 1965 A&P Tea Co was the largest US retailer of any kind…between 1915 and 1975 A&P was the largest food/grocery retailer in the US…until 1982 the company was also America’s largest food manufacturer. According to the Wall Street Journal A&P Tea Co was “as well known as McDonald’s or Google is today” and was lionised in the world of North American retail traders as “Walmart before Walmart”[11]. By the end of the 1920s A&P had become the first retailer to sell US$1 billion worth of goods[12].

The big players in US supermarkets in 2017 are names like Kroger, Costco and Safeway❈ but long before Costco, Safeway and Walmart existed and whilst Kroger was still a cash-and-carry grocer, there was King Kullen.

Founder of King KullenThe entrepreneur behind the King Kullen story was Michael J Cullen – Cullen was an ex-employee of the Kroger Company (and before that he had worked for the famous Great Atlantic & Pacific Tea Company, better known simply as A & P Tea). The manner by which Cullen came to start up his own supermarket chain is a classic story of turning rejection into a virtue. Cullen was managing a number of small Kroger stores in the late 1920s and identified a raft of improvements to the way Kroger did business that he believed, if implemented, would increase the company’s revenue tenfold. Cullen wrote to the Vice President of Kroger with his suggestions for a new, revolutionary type of dry goods/grocery store. In his letter Cullen envisaged “monstrous stores, size of same to be about forty feet wide and hundred and thirty to a hundred and sixty feet deep…located one to three blocks from the high rent district with plenty of parking space, and same to be operated as a semi-self-service store – twenty percent service and eighty percent self-service”, low prices and cash sales[1].

Kroger’s VP, whether through indifference, complacency or sheer lack of business nous, did not reply to his branch manager’s suggestions. Cullen, rebuffed but confident in the efficacy of his own store model, resigned from Kroger and set about realising the kind of new revolutionary grocery store he had envisaged. Settling his family in Long Island, Cullen found a vacant warehouse in Jamaica (Queens) with 6,000 square feet of space, which he chose as the optimal retail location. Cullen’s new store, which he dubbed “King Kullen”, opened its doors for business in August 1930[2].

King Kullen, QueensBilling itself as the “World’s Greatest Price Wrecker”, King Kullen was an instant success in New York with its formula of high volume and low cost…KK’s slogan was “Pile it high, sell it low!” Customers were willing to travel up to 30 miles to the Queens store to cash in on the bargains[3]. The American Food Marketing Institute (FMI) Identified the contribution of King Kullen as “serv(ing) as a catalyst for a new age in food retailing” and the Long Island-based grocery company is widely thought to be the first example of the modern supermarket. King Kullen’s reputation as the prototype form of supermarket (or at the very least a strong candidate for being so) rests in part on the endorsement given it by the Smithsonian Institute…FMI in 1980 with funding from the Heinz Corporation) initiated research by the Smithsonian which concluded that King Kullen met its five-point criteria for a supermarket, viz. it provided separate departments for produce; it offered self-service; it offered discount pricing; it conducted chain marketing; and it dealt in high volume quantities[4].

Under Cullen’s leadership the supermarket chain grew exponentially…8 stores by 1932 (each new store bigger than the preceding one), 17 stores by 1936 with annual sales of $6 (this despite a climate of economic depression)[5]. To match the “belt-tightening” days of the Depression and deliver the lowest possible prices, Cullen took a “no frills” approach to his King Kullen stores – facilities were simple, service was minimal. Unexpectedly though, just as he was about to expand King Kullen nationally and into franchising, Cullen died suddenly in 1936, aged only 52 [6].

Cullen’s wife and children continued King Kullen after his death. In 1961 it was listed as a public company however the family retained a controlling interest. King Kullen, after going through a static period, not changing with the times, was revamped and modernised from 1969, growing the business to a total of 55 New York stores by 1983[7].

King Kullen eventually diversified into bakeries, delicatessens, florists, pharmacies and health products, in addition to its staple of produce lines. Today it maintains a modest but healthy market position in New York, operating a chain of supermarkets (around 35 in total) in the Long Island area, concentrated in Nassau and Suffolk counties.

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❈ Walmart in groceries and food sales are the overall dominant competitor in the market but its retail outlets tend to be hypermarkets rather than supermarkets